Does My Property Qualify For Cost Segregation?

Property owners often ask, “Does my property qualify for cost segregation?” Eligibility depends on the property's use, depreciable basis, acquisition or construction details, and the tax rules that apply to the owner. Cost segregation is generally considered for income-producing real estate where depreciation deductions can be allocated among components with different recovery periods. Cost Segregation Eligibility The Expert Cost Segregation site explains that its calculator is intended for commercial, for-profit property with a depreciable basis of at least $500,000 and property built or acquired in 1986 or later. These are site-specific screening criteria, and a taxpayer should confirm the current tax treatment and eligibility with a qualified tax professional. Who Qualifies for Cost Segregation? Commercial property owners, real estate investors, and businesses that own qualifying depreciable assets may consider a study. The property's size alone does not determine whether a study is appropriate. The asset mix, documentation, expected tax position, and potential amount of qualifying short-life components are also relevant. Qualifying Property Types Cost segregation may be considered for apartment buildings, hotels, office buildings, retail properties, warehouses, restaurants, storage facilities, medical buildings, and other commercial assets. Different property types contain different components, so the potential classification opportunities can vary from one property to another. Reviewing Property Information A preliminary review normally considers the property address, purchase or construction date, purchase price or cost, property type, and other asset information. A more detailed study can then evaluate the physical components and supporting documentation. This helps determine which costs may qualify for shorter depreciation lives under the applicable rules. Discuss Eligibility With Your Tax Professional A cost segregation study should be coordinated with the owner's CPA or tax professional. Tax professionals can evaluate the owner's individual circumstances and determine how any resulting depreciation deductions should be reported. A preliminary analysis can provide an initial indication of whether further review is appropriate.